Weiner v. Mitchell, Silberberg & Knupp

• Decision Date: 29 December 1980
• Citation: 114 Cal.App.3d 39,170 Cal.Rptr. 533
• Court: California Court of Appeals Court of Appeals
• Parties: Julian WEINER, Plaintiff and Appellant, v. MITCHELL, SILBERBERG & KNUPP, Edmund A. Hamburger, Arthur Groman, and Howard S. Smith, Defendants and Respondents. Civ. 57548.

Page 533

170 Cal.Rptr. 533

114 Cal.App.3d 39

Julian WEINER, Plaintiff and Appellant, v. MITCHELL, SILBERBERG & KNUPP, Edmund A. Hamburger, Arthur Groman, and Howard S. Smith, Defendants and Respondents.

Civ. 57548.

Court of Appeal, Second District, Division 3, California.

Dec. 29, 1980.

As Modified Jan. 20, 1981.

R. Milton Smith, Beverly Hills, and Jerome A. Paver, Los Angeles, for plaintiff and appellant

Haight, Dickson, Brown & Bonesteel, Roy G. Weatherup and Jerry M. Custis, Los Angeles, for defendants and respondents.

COBEY, Acting Presiding Justice.

Plaintiff, Julian Weiner, appeals from a judgment (Code Civ.Proc., § 581d) dismissing, pursuant to Code of Civil Procedure section 581, sub-division (3), this action following his noticed failure to amend further his second amended complaint as expressly authorized by the trial court in its minute order sustaining the various demurrers (both general and special) of defendants thereto. ¹

FACTS

Plaintiff in his second amended complaint attempted to state causes of action for malpractice, conspiracy, fraud and deceit, breach of fiduciary duty and interference with prospective advantage against the various defendants. He alleged in this pleading the following in his malpractice count. Mitchell, Silberberg & Knupp was a law firm which inferentially included, among others, the three individually named defendants. Plaintiff was a duly licensed certified public accountant of substantial experience and a senior partner in a large accounting firm which had grossed in the fiscal year ending September 1971 a total of $1,750,000.00, of which plaintiff's personal share was $160,000.00. On or about February 1, 1972, plaintiff apparently merged his accounting firm into the accounting firm of Seidman & Seidman in which he became a partner. At that time he recommended to his clients that they become clients of the Seidman firm, which they did.

Between March 30 and July 12, 1973, each of the defendants agreed orally and in writing to represent plaintiff competently and faithfully as his personal counsel without conflict of interest and with full disclosure of all material facts to him in an investigation then being conducted by the Securities Exchange Commission (SEC) and other public agencies relating to Equity Funding Corporation and its subsidiaries. Nevertheless defendant, Arthur Groman, and certain fictitious defendants attended certain meetings of the Seidman firm in early 1973, at which they agreed that the firm should terminate plaintiff but retain his former clients. Each of the defendants knowingly and willfully failed to disclose these meetings In his second alleged cause of action for conspiracy plaintiff incorporated the foregoing allegations from his first cause of action. He then alleged that defendants agreed among themselves and with others to deprive him of his professional practice and to make him the scapegoat of the Seidman firm's inadequate audits of Equity Funding Corporation through essentially the aforealleged misconduct.

and this agreement to plaintiff or that the defendant law firm had already agreed to represent primarily the Seidman firm in the aforementioned investigation. Thereafter defendants knowingly and willfully failed to advise plaintiff to retain his own counsel in the investigation and failed to keep confidential any and all attorneys' work products and documents that plaintiff had turned over to them in the belief that they were acting exclusively as his personal counsel. Defendants then aided and abetted the Seidman firm in secreting audit workpapers relating to Equity Funding and the results of such audit while pretending to prepare plaintiff for his prospective testimony before the SEC and other agencies on behalf of the Seidman firm and as a partner therein. This led to plaintiff being wholly unprepared for and deprived of indispensable records in his testimony before the SEC with the result that he was thereafter criminally indicted for acts committed by others connected with the Seidman firm. Defendants explored [114 Cal.App.3d 43] with the SEC and the other agencies involved whether they would condone the Seidman firm's conduct in consideration of its collaboration in obtaining plaintiff's indictment by surrendering to the investigating agencies confidential workpapers, etc. of plaintiff which he had entrusted to defendants in professional confidence. As a result of this duplicitous conduct on the part of defendants and their representation of these conflicting interests of the Seidman firm and plaintiff, plaintiff suffered the aforementioned indictment, the costly expense of a criminal trial, the loss of his substantial accounting practice and of his valuable professional reputation. Defendants engaged in this conduct knowingly, oppressively, with malice aforethought and with full knowledge of this conflict of interest. Plaintiff therefore sought punitive and exemplary damages from them in the sum of $15 million.

In his third alleged cause of action for fraud and deceit, plaintiff again incorporated the allegations of his first cause of action. He then alleged that each of the defendants represented to him that they would act in his best legal interests and protect the same to the best of their ability, that these representations were made to plaintiff to induce him to retain defendants professionally in the aforementioned investigation and to induce him to turn over to them confidential papers and information of plaintiff necessary for his defense, that defendants nevertheless knew that these representations by them were false and that they were actually trying to protect the interests of the Seidman firm in the investigation, notwithstanding the fact that these legal interests were adverse to those of plaintiff, that plaintiff did rely upon these false representations of defendants and that as a direct and proximate result of such reliance plaintiff suffered the aforealleged damage, both compensatory and punitive.

In his fourth alleged cause of action for breach of fiduciary duty plaintiff once again realleged the allegations of his first cause of action. He further alleged that each of the defendants as his lawyers owed him the duty of utmost fidelity, which meant they had to keep his confidences, both oral and written, inviolate and not hide from him anything they could properly use in his defense and not act in behalf of any legal interests of others where those interests were adverse to his. Plaintiff more specifically alleged that defendants were obligated to prepare him adequately for his appearances before the SEC and the other investigating agencies and to make available to him all papers and materials necessary for his proper defense in such investigation. According to this cause of action, however, defendants breached this fiduciary duty to plaintiff by failing and refusing to prepare him properly for his interviews with the SEC and others, by secreting from him confidential materials In his fifth alleged cause of action plaintiff incorporated once again all of the allegations of his first cause of action. He further alleged that, by and through the aforealleged misconduct of defendants, they intended to put him out of his accounting business, to ruin him, to deprive him of all his clients and business, together with the good will thereof, for the benefit of the Seidman firm which they professionally represented, and that as a direct and proximate result of such misconduct plaintiff suffered the damages he had already alleged.

he had entrusted to them and by divulging to others, whose legal interests were adverse to his, plaintiff's confidential information they had obtained from him as his counsel. Plaintiff finally alleged in this cause of action that this misconduct by defendants had caused him the damages he had already alleged.

Defendants thereafter demurred to plaintiff's second amended complaint, requested the trial court to judicially notice the opinion of the Ninth Circuit Court of Appeals in United States v. Weiner (1978) 578 F.2d 757, in order to establish certain matters pertinent to their demurrers and moved to strike specified portions of this pleading relating to plaintiff's claim for punitive damages. After a hearing on these matters the trial court sustained defendants' demurrers to all of the causes of action alleged in plaintiff's second amended complaint on the grounds specified and took judicial notice of the just-mentioned federal Weiner decision. The court in its order, among other things, denied plaintiff leave to amend his pleading to incorporate any theory of liability predicated upon plaintiff's innocence of the charges proven against him in the federal prosecution. The court, however, granted plaintiff leave to amend his pleading within thirty days as to defendants' alleged failure to disclose to him the conflict of interest involved in their representation of the Seidman firm in the Equity Funding matter, with the alleged resulting loss to plaintiff of his accounting practice. The court apparently did not rule on defendants' motion to strike.

Thereafter, as already recited at the start of this opinion, the trial court dismissed this action after plaintiff had given notice that he would not further amend his second amended complaint in accordance with the authorization granted him. Following the filing of this appeal this court, on the motion and request of defendants, supplemented the record on appeal herein by adding thereto a duly certified copy of the decision and order of the State Board of Accountancy revoking plaintiff's certified public accountants certificate effective May 9, 1979. ²

DISCUSSION

1. It is proper for this...